When deciding where to invest your money, you need to always take into account your investment goals and objectives. Different types of investments carry varying degrees of risks and potential return. With a little research and dedication, you can make your own decisions. The following represents the typical investment types considered by the average investor in the United States.
CERTIFICATE OF DEPOSIT (CD)
A bank CD is a very safe investment. The CD is FDIC insured up to $250,000, so there truly is minimal risk. The only downside is that you cannot withdraw that money in the CD for a specific amount of time or else you'll receive a penalty. Bank CDs generally only pay up to 5% interest.
BONDS
A bond is essentially a loan you make to a company or a government. Bonds have varying degrees of risk, from essentially risk-free treasuries to junk bonds. The higher the risk of the bond, the higher the return will generally be.
STOCKS
Stocks are investments in companies. Depending on the company, the risk of the investment can be high or low. Obviously, buying stock in Johnson and Johnson is a lot less risky than a new internet startup company. In general, the stock market returns on average about 10% a year, though the actual return of any given stock will vary significantly.
MUTUAL FUNDS
A mutual fund typically invests in over 100 stocks, so it's an instant way to diversify your portfolio. However, the mutual fund generally charges a fee, which is about 1% of your assets per year. Because of this fee, most mutual funds do not outperform the market; an inexperienced person could potentially pick 100 stocks, but not charge a fee, and could outperform the average mutual fund.
REAL ESTATE
Real estate is a popular investment, often defined as an "Alternative Investment". The most obvious real estate investment you'll make is when you purchase your home. Your home can go up or down in value when you sell it; it depends on the housing market in your area. articlecircle.com
There are, of course, other types of investments to consider such as precious metals, derivatives, and FOREX for more advanced investors. Non-US investment products are similar, but there are other types not typically available in the US, such as Binary Options or European Options. Many independent investors are scepticle of paying an advisor or wealth manager a fee to make investment decisions for them, but it is always helpful to get an opinion from an expert. Structured Products and Defeasance portfolios can be created by some institutional groups that cannot be found independently.
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